Time to consider the ADU option
HOW ADDING AN AUXILIARY DWELLING UNIT ON YOUR PROPERTY CAN BE WORTH IT
CTW FEATURES
Got a boomerang adult child who needs to move back home? Have a senior loved one you want to keep closer tabs on? Or eager to earn some rental income without having to share your home with a stranger? An ADU may be the ideal answer.
Short for auxiliary/ accessory dwelling units — and sometimes known as guesthouses, in-law apartments, and granny flats — ADUs are compact secondary residences built within, onto, or adjacent to your primary residence. They often include one to two bedrooms, a bathroom, kitchen, and other living space, allowing them to function independently from your main home.
ADUs aren’t a fad: In fact, one in five remodelers polled by the National Association of Home Builders a few months ago revealed that they created an ADU by converting an existing space over the preceding 12 months. Nearly as many remodelers crafted an ADU by building a new addition. Also, over three in four pegged the budgets as upward of $50,000 to develop; only 6 percent completed ADUs valued at $25,000 or less.
“ADUs have been trending for quite some time but are gaining more in popularity lately,” says Realtor Robin Flint, an insurance specialist at HomeInsurance Rates. com and founding owner of Property Wise, LLC in Lake Charles, Louisiana. “More people are building ADUs to care for elderly parents in lieu of placing them in nursing homes or assisted living facilities. And affordable housing in urban areas may be difficult to find as home values rise, making ADUs a great alternative. They can be income-producing and may be a lucrative investment option.”
New York city-based Anna DeSimone, author of “Housing Finance 2020” (BookBaby, 2019), says ADUs can vary from 300 to 1,000 square feet or more and typically cost $20,000 to over $150,000, depending on amenities.
“The location of the structure often dictates the cost,” says DeSimone. “For example, finishing an attic or basement might be the least expensive route, since there are existing exterior walls and utilities are connected to the main house. An outbuilding will cost more, depending on the extent of weatherization, electrical, and plumbing needed.”
J.R. Skrabanek, Senior counsel with Jones Law Firm in New York City, says the best candidates for building an ADU meet key criteria.
“You need a large enough budget to build the structure, enough space to meet zoning standards, a willingness to learn how to be a landlord, and if renting it out, a desire to earn supplemental rental income,” notes Skrabanek.
ADUs are also ideal for live-in health aides and caregivers hired to assist someone living in the primary residence.
“Bad candidates may include people looking to temporarily rent out their ADU through Airbnb or another shortterm rental service, as such rentals might be prohibited by local zoning laws,” DeSimone cautions.
And therein lies the rub. Not every municipality allows these structures to be built or used as planned.
“Before building an ADU, check the zoning and building ordinances in your locality,” suggests Flint.
The good news is that many areas are encouraging the creation of ADUs to help relieve pressure on housing affordability.
“Cities and towns across the country are increasingly adopting or revising model codes for ADUs,” DeSimone adds.
In addition to this due diligence, check to see that your homeowner’s insurance provider will provide coverage for an ADU. Also, shop around carefully for a trusted contractor who can complete the job within your desired budget.
“Get a detailed contract in writing with your builder and any other trades you intend to hire,” Skrabanek recommends. “There are some unscrupulous builders out there who will take large payments up front in good faith and then disappear.”
Lastly, keep in mind that building an ADU may or may not increase your property’s value, depending on its location.
“An ADU could potentially decrease your property’s value if it’s not aesthetically appealing or placed in an awkward location,” says DeSimone.
“That’s why it’s important to consider resale value when building an addition or expanding on your property. When designs are customized for a very specific purpose — like an in-law apartment — the design or floorplan may not suit the next buyer.”